set 12&2&13&24&A1&S24 Flashcards

Question

A firm has received a letter from a client querying why the firm has charged VAT on its profit costs in a bill that the client has received. A junior solicitor is uncertain of the firm's reasoning behind this and has asked a senior partner for some advice. The senior partner saw this as an opportunity to teach the junior solicitor some of the details of VAT. Which of the following statements is incorrect and so should not be included in the explanation?

Answer 1

(E) A firm of solicitors must charge VAT where its taxable supplies exceed the threshold set by the government (£85,000 for tax year 2019/20). This refers to any form of supply or service provided by the law firm. This is why (B) and (C) are true statements. (A) and (D) are true as most law firms will exceed the threshold set by the government and will therefore be registered for VAT

Answer 2

E) Under the SRA Accounts Rules, solicitors must keep a client ledger identified by the client name for all client money. However, if the buyer is receiving a mortgage from an institutional lender on standard terms and conditions, then the solicitor may credit the mortgage funds on the borrower’s ledger but indicate in the details column that the funds are held for the lender. Therefore, (A) and (C) are incorrect, as the firm has a choice: It can open a ledger for the bank, or it can credit the money to the borrower’s ledger. (B) is incorrect because the firm is holding the mortgage funds for the lender until completion, after which it becomes the client’s money. (D) is incorrect, as at no point do the funds from the mortgage provider become business money – this would be a serious breach of the Rules

Answer 3

(B) The cheque can be paid into the client account, but the £3,800 must be transferred into the business account promptly. When a firm receives a cheque that contains both business and client funds, the SRA Accounts Rules give two options: Either split the cheque or deposit the money into one account and transfer the relevant funds to the other account promptly. As many banks will refuse to split cheques, (B) is the best answer. (A) is incorrect because the money can be paid into the client account or it can be paid into the business account. (C) is incorrect because the cheque can be paid into the client account and not the business account. (D) and (E) are incorrect because there is no rule that the money must be split. Additionally, (D) has the split wrong: £2,200 would go to the client account and £3,800 to the business account, as stated in

Answer 4

(D) The best course of action is to transfer £500 from the business account to the client account. An overdrawn account constitutes a breach of the SRA Accounts Rules which the firm must remedy promptly upon discovery. Since the account has become overdrawn by £500, the firm must put in £500 of its own money. (A) is not the most urgent action to be taken. (B) and (C) are not required actions (although (C) is a good idea). (E) is not the best solution for the firm as it is only required to make up the amount overdrawn - not the whole of the dishonoured cheque.

Answer 5

(D) The solicitor must make an application for first registration to HMLR within two months of completion of the mortgage. (A) and (E) are incorrect as creation of a first legal mortgage triggers first registration and so the building society will apply to have their mortgage appear on the charges register for the property. (B) and (C) are incorrect as they each state an incorrect timescale.

Answer 6

(C) To close the executors' client account, the remaining funds within it must be taken out of the account and transferred directly into the granddaughter's client account. (A) is incorrect as a note of this can be made in the granddaughter's client file, but this would not be sufficient to end the matter. (B) is incorrect. As the funds from the estate remain in the general client account, there is no movement; the funds are simply attributed to another client. (D) is incorrect. If the granddaughter was not a client of the firm you would not have a client ledger for her, you would have simply sent the granddaughter a cheque from the executors' client account. (E) is incorrect as the VAT ledger has no relevance here; this is not a business transaction.

Answer 7

(B) Formula A is used when the solicitors think it is prudent for one solicitor to hold both contracts on exchange. Here, the buyer's solicitor has limited availability, so under Formula A, the buyer's solicitor will send the contract signed by the buyer to the seller's solicitor, along with the deposit. The seller's solicitor will confirm both contracts are the same over the telephone, insert the exchange date in both, and send the part signed by the seller to the buyer's solicitor. (A) is incorrect because it describes a Formula B exchange - where each solicitor holds their own client's part of the contract, confirms they are the same, and then sends it. Since the buyer's solicitor will have limited time here, the facts provide that the solicitors did not agree this type of exchange. (C) is incorrect both because it describes a Formula B exchange, as just explained (where each solicitor holds their own client's contract), and because under the unamended Standard Conditions of Sale, the seller's solicitor will hold the deposit funds. (D) is incorrect because whilst it generally describes a Formula A exchange, as with the previous choice, under the unamended Standard Conditions of Sale, the seller's solicitor will hold the deposit. (E) is incorrect because none of the formulae for exchange require both solicitors to send their client's contract to the other solicitor before effecting exchange of contracts.

Answer 8

(D) If a limited company is borrowing money, it is necessary to register the charge at Companies House within 21 days. Thus, the remaining answers are incorrect

Answer 9

(B) The official search with priority against part of a registered title protects the buyer against registration of new adverse interests against the title to the property which is the subject of the search for 30 working days. The buyer's registration application will have priority over any application for an entry to be made in the register during the 30-day period (known as the priority period) if the buyer completes and registers their title within the priority period. (Note that the OS2 priority period is the same as the priority period conferred for an official search with priority against the whole of a registered title (OS1).) (A), (C), (D), and (E) are incorrect as they do not state the correct time period. Note that 15 working days is the priority period conferred by a full land charges search in an unregistered title transaction (completion must take place during the 15 working day priority period). Two months is the time period within which an application for first registration must be made to His Majesty's Land Registry following the purchase of an unregistered title

Answer 10

B) The firm will be accountable to HMRC for £100,000 (£110,000 output tax, less £10,000 input tax at a rate of 20%). (A) is incorrect because £110,000 is the full rate of output tax on the firm's profit costs with no deduction for input tax on the office refurbishment. (C) is incorrect because £27,500 is 5% of the profit costs, which is the incorrect rate of VAT, and also no deduction has been made for input tax. (D) is incorrect because £10,000 is only the amount of input tax that would be charged on the office refurbishment. This figure would be offset against any output tax the firm charged on the supply of its professional services, in this case £110,000. (E) is incorrect because £25,000 is input tax less output tax on this scenario but based on a VAT rate of 5%. The correct rate is 20%.

Answer 11

(D) This is an abatement of fees, and as such the firm should record the reduction of costs on the appropriate ledgers and send the client out a new bill. (A) is incorrect. As the firm has realised its error, it should not request payment in full from its client; it should simply send a new bill out. (B) is incorrect. A firm is obliged to abide by the SRA Accounts Rules as well as the overall principles set out in the Code of Conduct. Once an error has been identified, it must be rectified without delay. It would be inappropriate to not disclose this matter to a client and send them to the SRA, as the SRA would penalise the firm in this circumstance, in any event. (C) is incorrect because the firm need not waive its entire fee; it must rectify its error. (E) is true but it is not the best answer because the firm must also note the reduction of costs on the appropriate ledgers in its internal accounting records

Answer 12

(A) Client money (subject to certain exceptions which do not apply here) must be promptly paid into a client account. The firm should record the receipt on the client's ledger. (B) and (C) are incorrect as they do not require the solicitor to record the receipt, and in the case of (B), it is not sufficient to hold the money in a safe. (D) is incorrect both because the solicitor should record the receipt and because the payment must go into the client account before it is paid to the third party. (E) is incorrect as the surveyor is not the solicitor's client-client ledgers are for clients

Answer 13

(E) Running the car repair business from a residential area would be sufficient to constitute a material change of use from a planning point of view, in which case the local authority has a 10-year enforcement period. Thus, the remaining answers are incorrect.

Answer 14

(A) No title guarantee is most appropriate in this circumstance. No title guarantee is typically given when a seller has no knowledge of the property at all, for example, a mortgagee in possession, as the bank is here. (B) is incorrect. A limited title guarantee is narrower in scope than a full title guarantee; in it, the seller merely warrants that the seller has not created any charges or granted any rights during their period of ownership that have not been disclosed in the contract. This type of guarantee is typically given by a seller with less knowledge or involvement with the property and is appropriate when, for example, the seller is a personal representative. (C) is incorrect. A full title guarantee includes a guarantee that the seller is entitled to sell the property, that they will do all in their power to transfer the purported title to the buyer, and that they are selling the property free from all charges or encumbrances other than those disclosed in the contract. This type of guarantee is generally given by a seller who owns the full legal and equitable interest in the property and has lived at the property. (D) and (E) are incorrect. There are no such title guarantees

Answer 15

(D) The Code for Completion by Post provides that after completion, the seller's solicitor must act as agent for the buyer's solicitor, meaning that once the sale proceeds are received, the seller's solicitor will date and send the executed transfer (and any other relevant documents) to the buyer's solicitor not later than the end of the working day following completion. Note that the seller's solicitor is also required to confirm to the buyer's solicitor and to whomever holds the keys (such as an estate agent) – by telephone, fax, or email – the date and time at which completion has taken place. This notice must be given as soon as possible after completion. (A) and (B) are incorrect because it is the seller's solicitor who completes the completion documents. (A) is also incorrect in that it states the wrong timescale. (C) and (E) are incorrect for that same reason

Answer 16

A) £18,000. An additional 3% is charged in each band due to this being an additional purchase of residential property. Residential properties are exempt from VAT, so we need not worry about calculating VAT. Thus, the landlord must pay 3% on the first £125,000 (£3,750), 5% on the next £125,000 (£6,250), and 8% on the amount over £250,000 (£350,000 - £250,000 = £100,000; £100,000 x 8% = £8,000). So, £3,750 + £6,250 + £8,000 = £18,000

Answer 17

(A) The payment should be recorded as a debit in the client ledger - client side, as the firm would need to debit the client account to send her the money. The corresponding entry would be a credit entry in the cash account, as the firm no longer owes this money to the client. (B) is incorrect as this is not business money and so should not be reflected on the business side. (C) and (D) are incorrect because there should be a corresponding credit to match the debit entry. (E) is incorrect because the payment should not be reflected as a credit to the client account.

Answer 18

(E) As a bill has been issued including the disbursements, the cheque does not include any client money and so should be placed into the business account. (A) is incorrect as this receipt does not contain client money. (C) is not the best answer here as business money could be placed into the client bank account so long as it is promptly transferred to the business bank account. (B) and (D) are incorrect as we know the receipt is not client money.

Answer 19

(A) The Principles provide that a solicitor must act with independence, and in each client's best interests. Therefore, when a solicitor recommends a particular person or business to a client, the recommendation must be in the best interests of that particular client and must not compromise the solicitor's independence. Here it appears that the solicitor is not acting with independence because he will not recommend any other estate agents out of loyalty to this estate agent, even though there might be other estate agents who are more suited to a client's specific needs. The fact that the solicitor has not received payments of money from the estate agent is irrelevant; the meals and golf days might be seen as inducements, which indicate that the solicitor has been persuaded to recommend the estate agent when it is not in the best interests of the clients to do so. (B) is therefore incorrect. (C) is incorrect because a 'prohibited referral fee' is the payment or receipt of referral fees in claims for damages following personal injury or death and is not relevant here. (D) is incorrect because even though the solicitor does not have a financial interest in the estate agent's business, he is not acting with independence or in the clients' best interests. (E) is incorrect. It is true that a solicitor must inform the client of any interest they have in referring the client to another person, but even if the solicitor does this, they still must act with independence and in the best interests of the client when making the referral.QUESTION ID: ETH040

Answer 20

(D) The Property Register. The woman is interested in buying a property with the benefit of the right-of-way. The question makes it clear that the title is registered. If a registered title benefits from any rights, these would appear on the Property Register. (A) is incorrect as the Proprietorship Register specifies the class of title held and the name of the current holder or holders of the legal estate. (B) is incorrect as the Charges Register contains details of encumbrances on the land, that is, entries which adversely affect the land. (C) and (E) are incorrect because the facts ask specifically where the reference should appear on the title – and the question makes it clear this is a registered title. It might be necessary to look at a conveyance or deed if the right-of-way is not yet registered.

Answer 21

(C) The agency method must be used here as the invoice is addressed to the client. If there are sufficient funds in the client account, the entire amount should be debited from the client account, without distinguishing between the fee and VAT. (A) is incorrect because the agency method, not the principal method, applies here and will be used. (B) is incorrect. Petty cash would not be used here as this is not an expense of the firm; it is the client's. Also, typically petty cash is used only to deal with small payments, and the payment here is not small. (D) is incorrect. A firm should issue VAT invoices only in relation to its own professional charges/supply of goods; here, it should simply pass the original invoice, including the VAT element, on to the client. (E) is incorrect as only VAT related to the solicitor's professional charges is recorded on its HMRC VAT ledger.

Answer 22

(D) It is not true that a solicitor must account to its client for all interest. The SRA Accounts Rules provide that a solicitor should account for a fair sum of interest unless the client has agreed an alternative arrangement. (A) and (B) are true because the solicitor can choose to offset any interest payments against other amounts owed by the client to the firm for payment of bills. (C) is true because a solicitor and client can reach an agreement to contract out of the provisions of the rules on payment of interest. (E) is true because the solicitor should account to the client for a fair sum of interest.Q

Answer 23

(C) To find out more about the extension, the solicitor would look at the Property Information Form ('PIF') and the results of a local search. The seller should disclose the fact that they have carried out building works on the PIF. Details of the planning and building regulation documentation will be revealed by the local search. (A) is incorrect as there is no such thing as a local planning search. (B) is not as good an answer as (C) as the PIF would be the starting point; it would be the basis of enquiries, but it might be that enquiries are not needed, depending on what is provided in the PIF. (D) and (E) are incorrect as the drainage and water search reveals whether the property is connected to the public foul drainage system and public water supply and is not related to the extension

Answer 24

(A) The gift of £10,000 to the witness of the original will is valid. A codicil is a document that adds to, amends, or partially revokes an existing will. It must be executed with the same formalities that are required for a will. A codicil may remedy a gift which was void because the beneficiary also witnessed the will. Here, the gift of £5,000 to the witness in the will is invalid because any gift to a beneficiary who is also a witness fails. However, this is remedied by the codicil, as there were different witnesses for the execution of the codicil. The gift of £10,000 is therefore valid. (B) is incorrect. There can be different witnesses for the codicil and the will. (C) is incorrect. The codicil makes clear that the rest of the will is unamended, and so other gifts remain effective. (D) is incorrect. The codicil was validly executed, so all three gifts within it are valid. As explained above, because different individuals witnessed the codicil, the gift to the witness of the will is valid. (E) is incorrect. The original gift of £5,000 is invalid, as the beneficiary was a witness to the will. Only the gift of £10,000, in the correctly executed codicil, will take effect

Answer 25

C) The man's will was revoked by his civil partnership. A marriage or civil partnership revokes a pre-existing will unless it is clear from the will that: (1) the testator was expecting to marry or enter into a civil partnership with a particular person, and (2) the testator intended that the will should not be revoked by the marriage or civil partnership. Since the man made his will while still married to his wife, he could not have written it with the expectation that he would be entering into a civil partnership with his partner. Therefore, the testator's civil partnership revoked the will. (A) is, therefore, incorrect, as the will has been revoked. (B) is incorrect, as a will is not revoked by separation. (D) is incorrect. If a testator divorces after executing a will, gifts to the testator's former spouse will fail, but the will is not automatically revoked by the divorce. (E) is incorrect. Getting engaged does not revoke an existing wil

Answer 26

(C) The 21-year-old son has a vested interest in one-third of the estate, and the 15-year-old son and 5-year-old granddaughter each have contingent interests in one-third of the estate. When a person dies intestate without a spouse or civil partner, the strict order of entitlement under the intestacy rules applies to determine who will inherit the estate. In this situation, the man's estate will pass to his issue on statutory trusts. This means that if a person in the category of issue has died before the deceased, the person's issue will take their parent's share per stirpes, provided the issue attain age 18 or marry earlier. The man's issue are his three sons. As the eldest son has died, his share passes on to his child. Accordingly, the man's two surviving sons and the child of the eldest son all receive one-third of the estate. The 21-year-old son has a vested interest, as he is over the age of 18. The 15-year-old son and 5-year-old daughter of the eldest son have contingent interests as they are under 18 and unmarried. They will receive their shares of the estate when they reach age 18 or marry at an earlier age. (A), (B), (D), and (E) are incorrect because they do not, therefore, accurately reflect the application of the intestacy rules to this estate

Answer 27

(A) The son will inherit the entire estate. If a beneficiary has predeceased the testator, the gift to them will lapse-that is, fail. Here, the man's brother has died before the man, so the gift of the car will lapse. The car does not pass to the brother's wife or daughter. Instead, the car will form part of the residuary estate and will pass to the man's son. (B), (C), and (E) are incorrect, as the man's brother's wife and daughter will have no claim on the car. If a testator makes a gift to a child or other issue who die before the testator and leave living issue, the living issue receive the gift. This rule does not apply here because the man's brother is not his issue. (D) is incorrect. The lapsed gift will not affect the validity of the will itself. Only the lapsed gift will fail

Answer 28

D) The woman's executor must purchase an Audi car for the cousin if there are sufficient funds in the estate. The gift of "an Audi car" to the cousin is a general legacy-a gift that does not identify a particular item. The doctrine of ademption does not apply to general legacies. Instead, if the subject of a general legacy is not in the estate, the beneficiary is entitled to require the executor to purchase it if the estate has sufficient funds. Here, since the woman did not own an Audi car at the time of her death, the cousin is entitled to require the woman's executor to purchase an Audi car for them if there are sufficient funds in the estate. (A), (B), and (E) are therefore incorrect. (C) is incorrect because lapse of a gift arises when a beneficiary dies before the testator, which has not occurred here.

Answer 29

(B) The son will inherit the entire estate. If a will makes a gift of specific property and that property is not in the testator's estate when the testator dies, the gift is said to adeem-which means it fails. Here, the woman's will left her BMW car to her daughter. The BMW that the woman owned when she made the will was not in the woman's estate when she died; instead, she had a Ford car. The woman's will also left a painting to her sister. That painting was also not in the woman's estate when she died. Both gifts, therefore, adeem, and the daughter and sister have no entitlement under the will. All assets pass to the son as the residuary beneficiary. (A) is incorrect. The gift of the car will adeem, as the BMW car was not owned by the woman when she died. The Toyota will pass to the woman's son as the residuary beneficiary. (C) is incorrect. The gifts of the BMW and the painting fail due to ademption, but the will itself remains valid. (D) and (E) are incorrect. The daughter and sister have no entitlement under the will as the gifts of the painting and BMW have adeemed. They do not receive substitute gifts

Answer 30

(D) The man's wife will be entitled to the man's personal belongings, a statutory legacy of £322,000, and half of the remaining assets. The rules of intestate succession apply when a person dies without a will. Under these rules, when the deceased is survived by a spouse or civil partner and issue, the spouse will receive personal chattels, £322,000, and one-half of the residue. The deceased's issue will take the other half of the residue. Here, therefore, the man's wife and two daughters will be entitled to share the estate. The wife will receive the personal belongings, a statutory legacy of £322,000, and half of the remaining assets. The other half of the remaining assets will pass to the man's daughters. (A), (B), (C), and (E) are, therefore, incorrect.

Answer 31

(C) The man's daughter will receive the man's half share in the rental property and the company shares only. Property held on a tenancy in common rather than a joint tenancy does not pass outside a will or outside of the laws of intestacy. It remains the property of the tenant in common after they die because it is not subject to the right of survivorship that is included in jointly owned property. Therefore, it can be disposed of by will. The company shares will pass to the man's daughter under his will because no special rule applies to the shares. However, all of the rest of the man's assets will pass outside his will as explained below. (A) is incorrect because the trust fund was only a life interest. A life estate ceases on the beneficiary's death. So, there was no interest in the trust to pass on to the man's daughter after the man died. (B) is incorrect because life assurance proceeds pass outside a will and go to the beneficiary named in the assurance policy. Here, the policy left the proceeds on trust for the man's son. (D) and (E) are incorrect because the bank account is a joint bank account and so all of it will pass to the man's wife via survivorship.

Answer 32

(D) The will is invalid because it was not appropriately witnessed. To be valid, a will must be in writing and signed by the testator in the presence of two or more witnesses present at the same time who each sign the will in the presence of the testator. Here, two witnesses were present but they did not sign the will, and so the will was not validly executed. (A) is incorrect. A will can be valid signed in pencil. (B) is incorrect. Signatures using initials, a stamp, a cross, and an unfinished signature have all been recognised as valid. (C) is incorrect. The signature may validly appear anywhere on the will. (E) is incorrect. An attestation clause is not a requirement, but the lack of an attestation clause means that the person offering the will into probate must provide proof that the correct will execution formalities were followed, usually on the basis of testimony from one of the witnesses.

Answer 33

(D) In order to make a valid will, a testator must have legal and mental capacity. Those aged over 18 have legal capacity. Mental capacity is the concern here, as the man was elderly and suffered from dementia. A testator has mental capacity if, at the material time, they understood the nature of their act of making a will, the extent of their property, and the claims to which they ought to give effect. The record of the diagnosis of dementia may assist the daughter's case, since this may help her to suggest that the man lacked capacity, although the diagnosis is not conclusive. (A) is incorrect. It is good practice for solicitors to involve a client's doctor in the making of the will if there is a concern over the client's capacity. The doctor should confirm the client's capacity and ideally be present when the will is made. The steps taken here are likely to hinder the daughter's argument that the man lacked capacity. (B) is incorrect. Solicitors should take detailed attendance notes in relation to the making of the wills, and this full record of the circumstances when the will was made is not likely to be helpful to the daughter's case. (C) is incorrect. At common law, to have mental capacity, it is essential to ensure that the testator understood the extent of their property (as well as the nature of the act of making the will and the claims to which they ought to give effect). The fact that this was discussed with the man should help to show that the man understood the extent of his assets, and so it will not support the daughter's case. (E) is incorrect. At common law, in order to have capacity, a testator must understand the claims to which they ought to give effect. The fact that the man recognised the existence of his daughter but confirmed that he did not wish to leave her property will be unhelpful to the daughter's case. There is no obligation for the testator to make gifts to relatives, but it should be clear that the testator appreciated the existence of possible beneficiaries such as his daughter.

Answer 34

(D) The legislation is still valid law and applies to the parties in this case. Under the Human Rights Act 1998, a declaration of incompatibility does not change the status of the legislation in question and still applies to parties in the case in which the declaration was made. Therefore, (A) and (E) are incorrect. (B) is incorrect because the Supreme Court cannot do any more than make a declaration; it has no power to amend an Act of Parliament. (C) is incorrect because the European Court of Human Rights has no power to strike down legislation

Answer 35

(C) A Part 36 offer must stay open for a minimum of 21 days. The time in which the offer may be accepted is called the relevant period

Answer 36

(A) Occasionally, applying ordinary meanings to words under the literal rule can lead to absurd results. When that happens, under the golden rule, courts may use something other than a word's ordinary meaning to avoid the absurd result. (B) is incorrect as under the literal rule, when interpreting statutes, courts will give words their ordinary meaning. In other words, the court will apply the dictionary meaning to the words to resolve any ambiguity. Here, using a dictionary definition would lead to an absurd result; a person in the vicinity of a place could be punished but a person actually in the place could not be. (C) and (D) both work in a similar fashion, but would not be applied in this situation as the golden rule would be the first route taken when the literal rule fails. (E) is incorrect because this doctrine is a rule of language interpretation providing that when a general word follows more specific words, the court should give the general word a similar meaning as the specific words

Answer 37

(B) The claimant is likely to have a successful claim. The encroachment of the weed is causing a substantial interference with the claimant's use of his land. The company did not create the nuisance; it has arisen by an act of nature. However, the company is still liable for the nuisance arising on its land if it knows or ought to know about it and fails to take reasonable steps to deal with it. (In these circumstances the company is said to 'continue' the nuisance.) On the facts, the company did know about the weed and the nature of the risk it posed, and the company failed to take reasonable steps to prevent the spread of the weed even though it could have. So, the claimant is likely to have a successful claim in private nuisance provided he can show that the company continued the nuisance by failing to take reasonable steps to prevent the spread of the weed. (A) is not correct. The company can be held responsible for a nuisance created by an act of nature, as explained above. (C) is not correct. Trespass to land deals with intentional and direct interference with the claimant's possession of land. In contrast, the tort of nuisance covers damage which is indirect, such as the harm that occurred here. (D) is not correct. Liability under the rule in Rylands v Fletcher requires showing that: (1) the defendant brought onto his land something likely to cause harm if it escapes; (2) the defendant was engaged in a non-natural use of the land; and (3) the thing gathered on the land did escape and caused damage. To establish the second element, the defendant must be engaged in a special use of the land which carries an increased risk of danger to others. Here, the company was not engaged in a non-natural use of the land; in fact, it was not using the land at all. Thus, the company is not liable under the rule in Rylands v Fletcher. (E) is not correct. The company did not create the nuisance so its liability rests on having failed to take reasonable steps to deal with it, as explained above. The company is only obliged to do what is reasonable, not to remove the nuisance whatever the cost

Answer 38

(C) The SRA Codes of Conduct provide that all fee sharing agreements with a third party must be in writing. Additionally, the client must be informed of any fee sharing arrangement that is relevant to their matter. The arrangement between the solicitor and the accountant meets these requirements. (A) is incorrect because written consent from the client is not required; it is sufficient to inform the client of the fee sharing arrangement. (B) is incorrect because fee sharing arrangements are generally permitted. (D) is a completely incorrect statement. There are restrictions on payments for referrals in matters involving personal injury and wrongful death, and where the client is subject to criminal proceedings. Fee sharing arrangements and payments for referrals are generally permitted in other types of matters, such as the tax matter here. (E) is incorrect because a solicitor can enter into a fee sharing arrangement with any third party, not just with other lawyers.

Answer 39

(B) An appeal of a High Court Judge's decision would be to the Court of Appeal. All of the other answers are incorrect. (A) is incorrect as the Supreme Court generally hears civil appeals from the Court of Appeal. (C) is incorrect as there is no appeal from one High Court Judge to another High Court Judge. There is no amount requirement for appeals from this level, so (D) and (E) are incorrect

Answer 40

(A) Given that the man was killed instantly with no pain, no damage to property, and no loss of earnings, he has not suffered any actionable damage. There is no claim in respect of the death itself. So, although an existing cause of action does survive death for the benefit of the claimant's estate, on these facts there is no existing claim to survive. (B) is not correct. As stated above, there is no existing cause of action to survive the man's death. In addition, where a claim does survive, no damages are recoverable for loss of earnings in the period after death. (C) is not correct. Bereavement damages are only open to a parent where the deceased was a minor (and unmarried). The deceased here was 20, so not a minor. (D) is not correct. It is true that there can be no successful claim for bereavement damages. However, it is not correct that the parents could recover damages for the man's earnings in the years after his death. There can be no claim for these lost earnings because the man's parents were not financially dependent on him. (E) is not correct. It is not correct that claims in tort do not survive the death of the parties. Had the man had a valid claim for damages, it would have survived his death, as discussed above.

Answer 41

(E) £2 million. Business asset disposal relief can be claimed as to gains of up to £1 million by an individual who holds at least 5% ownership of a company in which they are either an employee or an officer. Because each spouse here was an officer of the company, each is eligible to claim £1 million business asset disposal relief to reduce tax on that part of their gain to 10%. As each spouse's total gain is far in excess of the £1 million, their annual capital gains allowance will be applied to the gain after applying the full amount of business asset disposal relief, making (D) incorrect.

Answer 42

(B) The colleague's offer had been revoked so there is no contract. Revocation must be communicated to the offeree, but this can be done by a reliable third party, which in this case was the man's friend, so (A) is not correct. (C) is incorrect, as an offer can be revoked at any time, even if there has been a request to keep it open, provided the rules as to communication of revocation have been complied with, which was the case in this scenario. (D) is incorrect because it is not relevant. Whilst a counteroffer will terminate an offer, and it is correct that there was no counteroffer in this scenario, that is not the reason there's no enforceable contract: there's no enforceable contract because the offer had been validly revoked. (E) is incorrect because it does not state the reason why there is no binding contract. If a request to keep an offer open is supported by consideration, this creates a separate collateral contract. If the offer is then revoked, it is the separate collateral contract that is breached. The remedy for breach of that collateral contract would be a claim for damages. However, a breach of the collateral contract would not entitle the neighbour to accept the original offer if that offer has been revoked.

Answer 43

(C) A conflict (or significant risk of conflict) relates to the same matter or a related matter. A general business interest is not sufficiently 'related' to create a conflict situation. A firm of solicitors could therefore act for two companies whose main business was the same, provided that it was on unrelated issues. So, the firm here could act in an employment discrimination matter for the clothing company and in conveyancing matters for the competitor without a conflict arising. However, even if there is no significant risk of conflict, the solicitor or firm may decline to act in any event due to professional embarrassment. (A) and (B) are incorrect because there is no conflict or significant risk of conflict in this situation. (D) is incorrect because it is irrelevant that the partner who acts for the competitor is in a different branch office. Even if the partner were in the same branch office, there would be no conflict. (E) is incorrect because the concept of 'competing for the same objective' is relevant only when there is a conflict of interest (for example, when two companies who are competing for the same asset want the same firm to act for them in their separate bids for that asset). As discussed, there is no conflict of interest between the clothing company and its competitor because the firm would be acting for the clients in unrelated matters

Answer 44

(D) A claimant must serve an issued claim form within four months of the date of issue, failing which the court will not permit the claimant to continue with the claim. It will be extremely difficult to persuade the court to allow the claim to continue if the claimant fails to serve in time. (A) is incorrect because the claimant need only issue the claim form, not serve it, by the end of the limitation period. (B) is incorrect because the period is four months, not 14 days. Fourteen days refers to the period that the claimant has available to serve Particulars of Claim following service of the claim form. (C) is incorrect for the same reason - it refers to the period for serving the Particulars of Claim. Additionally, the trigger date is not 30 April, which represents the end of the limitation period. (E) is incorrect because the period is four months, not one month.

Answer 45

E) The Regulation remains part of UK law, but the courts should still give effect to the Act and not the Regulation. Under the European Union (Withdrawal) Act 2018, after the end of the transition period (that is, after December 2020), most EU law became part of UK law as a new category of law-retained EU law. This would include the Regulation. However, legislation enacted after the transition period is not subject to the principle of supremacy, meaning that, with the end of the transition period, the UK can legislate contrary to EU law. Here, because the Act was passed after the end of the transition period, Parliament was free to legislate contrary to EU law, and as with any other valid Act of Parliament, the courts must give effect to it. (A) is incorrect because the courts can make a declaration of incompatibility only in relation to matters involving human rights. (B) is incorrect because, as mentioned, Parliament should give effect to the Act. (C) is incorrect because the House of Lords has no specific role in relation to this issue. (D) is incorrect because, while the choice correctly states that the Act should be given effect, it incorrectly states that the Regulation is no longer part of UK law. As mentioned, the Regulation remains part of UK law, specifically as retained EU law

Answer 46

(B) A solicitor is permitted to refer the clients to their separate business as long as they have the client's informed consent to do this. Informed consent means the solicitor should tell the client about their interest in the separate business. (A) and (C) are incorrect because informed consent from the client is required. (D) and (E) are incorrect because referring a client to a separate business is permitted with informed consent, and there are no other facts indicating that the solicitor is acting without integrity, or that this would create a conflict of interest.

Answer 47

E) The daughters are likely to recover. The daughters' claim will be in the tort of negligence to recover their loss of legacies under the will. This loss is pure economic loss, which generally is not recoverable in the tort of negligence. However, an exception applies where a person providing a service, such as drafting a will, has undertaken a responsibility towards those benefiting from it, such as the beneficiaries under the will. So, a duty of care was owed by the solicitor to the daughters. The facts say that the solicitor was negligent by failing to act, and this breach of duty caused the daughters' loss. (A) is not correct. Whether it would be 'fair, just, and reasonable' to impose a duty of care is one of the factors to be applied in a novel duty situation. However, this is not a novel duty situation because, in the case of negligent provision of services causing pure economic loss, there are already established rules for when a duty of care will be owed. (B) is not correct. It is true that solicitor to client is an established duty situation. However, the facts here do not relate to a solicitor to client relationship because the daughters are not the solicitor's clients. The duty in question here is solicitor to beneficiary. (C) is not correct. The daughters did not instruct the solicitor, but that is not the factor which determines whether a duty of care was owed to them, as discussed above. (D) is not correct. It is true that the daughters have suffered pure economic loss, but they are likely to be owed a duty of care, as explained above

Answer 48

(C) The hospital is not liable. The doctors owed their patients a duty of care but may not have been in breach of that duty. The doctors are in breach if they fell below a reasonable standard of care. This is assessed having regard for the knowledge available at the time and not with the benefit of hindsight. As the side effects have only recently been discovered, it would not be reasonable to expect the doctors to have taken precautions to avoid them. So, if the doctors were not negligent, the hospital would not be liable. (A) is not correct. The hospital is responsible for the actions of the doctors employed there (under the principle of vicarious liability and also because it owes its own duty to the patients). However, the hospital will not be liable if the doctors have not fallen below a reasonable standard of care, as explained above. (B) is not correct because, on the facts, the doctors did not fail to take reasonable care, as explained above. (D) is not correct because it refers to the standard of strict liability imposed by statute in respect of defective products. That standard is not applicable here because the facts do not relate to the supply of a product. (E) is not correct because the patients did not consent to the risks of treatment because they were not aware of them.

Answer 49

C) The advert is directly discriminatory on the grounds of the protected characteristic of religion because the firm is expressly treating non-Muslim candidates less favourably than Muslim candidates. Direct discrimination is treating one person less favourably than another because of a protected characteristic. The firm cannot justify direct discrimination on the grounds of religion. Only direct discrimination on the grounds of age or disability may be justified. (A) is incorrect because, as explained above, the advert is directly, not indirectly, discriminatory. Non-Muslim candidates are unable to apply for the job so are being treated less favourably than Muslim candidates. (B) is incorrect because direct discrimination on the grounds of religion cannot be justified. Note that the justification wording in this answer choice is also incorrect. An employer must show an action is a proportionate means of achieving a legitimate aim. (D) is incorrect because the advert is directly discriminatory on the grounds of religion which cannot be justified, even by showing that the action is a proportionate means of achieving a legitimate aim. (E) is incorrect because the advert is directly discriminatory against non-Muslim applicants on the grounds of religion.

Answer 50

B) The House of Lords must grant the Bill a second reading, although it can seek to amend the Bill later in the legislative process. In this situation, the government is seeking to enact legislation that implements a manifesto commitment that they made at the last election. This means that the House of Lords is expected to comply with the Salisbury Convention. Under the Salisbury Convention, the House of Lords cannot block a bill that implements a manifesto commitment. Instead, the Lords will grant the legislation a Second Reading as a matter of course. However, the Lords retain the right to make amendments at later stages of the legislative process. (A) and (C) are incorrect because, for the reasons discussed, the Lords must grant a Second Reading to the Bill, rather than prevent it from becoming law. (D) and (E) are incorrect because those procedures do not exist.

Answer 51

(B) The venue is most likely to succeed on the argument that the condition is unreasonable. The test for unreasonableness is that the decision of a public body must be so outrageous in its defiance of logic or of accepted moral standards that no sensible person who applied their mind to the decision could have arrived at it. The condition imposed by the council would likely meet this test. Not only are the operating hours totally unsuitable for the venue, but they may cause problems for the nursery next door (as it is open during the hours when music would be allowed). Furthermore, allowing music to be played at more suitable hours (for example, on weeknights and on weekends) would probably cause far less of a problem because the nursery would be closed at that time and the music would likely not be a disturbance to the pub. (A) is incorrect because proportionality is only used for cases involving human rights or EU law. (C) and (D) are incorrect because there is no indication that the council took into account irrelevant considerations or acted with an improper purpose. (E) is incorrect because public authorities do not have a general duty to consult.

Answer 52

(B) This is a situation where the conflict can be resolved under the 'competing for the same objective' exception, which applies where two or more clients are competing for an objective which, if attained by one client, will make that objective unattainable to the other(s). Here the firm can resolve the conflict under this exception because the clients are two companies competing to take over the same third company. A firm may act for both clients in this situation where: (1) the clients have given informed consent, given or evidenced in writing, to the firm acting; (2) where appropriate, the firm puts in place effective safeguards to protect the clients' confidential information; and (3) the firm is satisfied that it is reasonable to act for all the clients. These conditions are met here. (A) is incorrect because the 'competing for the same objective' exception may be applicable to this conflict. (C) is incorrect because even though the 'substantially common interest' exception is inapplicable to this situation, the separate 'competing for the same objective' exception may be used. (D) is incorrect because it is not required that the clients take independent advice. (E) is incorrect because the conflict rules generally apply to the entire firm, not individuals within it. Whether separate teams of solicitors will be working on the matters is irrelevant to whether a conflict exists.

Answer 53

(B) Where a time for delivery is agreed in a commercial contract, there is a presumption that time for delivery is of the essence of the contract. This means that the agreed delivery time is a condition of the contract. If it is not complied with, the innocent party (here, the builder) can terminate the contract and claim damages. The damages will include the additional cost of sourcing replacement bricks. However, the compensation payable by the builder to their customer depends on the contract between the builder and the customer, so it is unlikely to be 'loss flowing naturally from the breach'. The builder could claim it only if it was in the reasonable contemplation of the builder and the merchant when they concluded their contract. Here, there is no indication in the facts that the merchant was aware that compensation was payable to the builder's customer in the event of delay, and so the builder cannot recover for what they must pay to their customer. (A) is incorrect because as stated above the builder can terminate the contract but is unlikely to be able to claim damages for the compensation payable to their customer. (C) is incorrect because the builder is unlikely to be able to claim damages for the compensation payable to their customer but can claim for the additional cost of sourcing replacement bricks. (D) is incorrect because the builder is unlikely to be able to claim damages for the compensation payable to their customer. (E) is not correct because this would be an order for specific performance. Specific performance is not available where, as here, damages would be an adequate remedy. The builder can obtain the bricks elsewhere and can recover damages for all their losses under the contract. Their problem is that the contract does not extend to the more remote losses.

Answer 54

(A) Breach of the requirement to have a car valeted before delivery does not go to the root of the contract, and is therefore not a fundamental breach which would give the innocent party the right to bring the contract to an end. It is therefore a breach of a warranty (a lesser term) rather than a condition. Breach of a warranty entitles the customer to damages only, so (A) is the correct answer. (B) and (C) are both incorrect as breach of a warranty does not give the customer the right to terminate the agreement, only to claim for damages. (D) is incorrect as equitable remedies will be available only where damages would not be an adequate remedy, and that is not the case here. (E) is incorrect as the customer does not have the right to terminate the contract for a breach of a warranty, only for breach of a condition

Answer 55

(C) Generally, under the common law system of England and Wells, statutes take precedence over court decisions. However, not every conceivable case can be covered by a statute, so decisions made by judges fill in the gaps and details that legislation has left. (A) is incorrect. Although the legal system of England and Wales is a common law system, legislation takes priority over judges' decisions. (B) is incorrect because judges are allowed to interpret and apply legislation when the legislation may not be entirely clear when applying it to the facts of a particular case. (D) is an incorrect statement of law. New legislation does not have to follow the prior decisions of judges. (E) is also incorrect and a false statement. The primary focus in civil law systems is on statutes and legislation; in the common law system, the focus is on legislation, but judicial decisions intepreting and applying the legislation play a large role.

Answer 56

(C) Cases heard in the Magistrates' Court are appealed to the Crown Court, then to the Court of Appeal (Criminal Division), and finally to the Supreme Court, provided the case involves a point of law of public importance and that leave to appeal has been granted. (A) is incorrect because the first route of appeal in a criminal case is the Crown Court. Also, the High Court will hear appeals in criminal cases only in relation to procedural matters, that is, if it appears the magistrate incorrectly applied procedure, such as denying admissible evidence. There is nothing in the facts to suggest that this was the case. (B) is incorrect for similar reasons. (D) is incorrect because the appeal should go to the Crown Court or High Court (if appropriate) before the Court of Appeal and Supreme Court. (E) is incorrect because a case must be appealed to the Court of Appeal before the Supreme Court.

Answer 57

D) The transfer to the spouse is a transaction at an undervalue and may be voided. A transaction at an undervalue arises when a transfer of property as a gift or for significantly less than market value is made within two years of a company's insolvency. Thus, (C) is incorrect. (B) and (E) are incorrect because the granting of security is not a transaction at an undervalue. (A) correctly states that the granting of security was not a transaction at an undervalue, but it is not true that the transfer may not be voided by the court-the court may void a preference as well as a transfer at an undervalue.QU

Answer 58

A) The original manager is entitled to damages only. Damages would be an adequate remedy in this case. The manager can be awarded the profits that they would have expected to make under the management contract until it could be properly terminated, less an allowance for mitigation. (B) is incorrect because specific performance would not be granted in this scenario. Specific performance is an equitable remedy requiring the party in breach to carry out their contractual obligations in full. It will be granted in some cases in which damages are not an adequate remedy, but it will not be granted if the contract is for employment or similar personal services. (C) and (D) are incorrect. There is never an entitlement to an injunction. It is a discretionary remedy. Bands need managers, so granting an injunction prohibiting the band from engaging a different manager will have the effect of forcing the band to work with the first manager. This would be tantamount to enforcing a contract for personal services. Also, damages would be an adequate remedy in this case. The manager could be awarded the profits that they would have expected to make under the management contract until it could be properly terminated, less an allowance for mitigation. (E) is incorrect because the prohibition is not a restraint of trade clause. A restraint of trade clause is a clause which restricts activities after a contract has come to an end. This prohibition is part of an ongoing relationship; prohibitions of this sort are commonplace, and in fact the management contract could not really work without it

Answer 59

E) Unless there are restrictions in the articles (unamended Model Articles do not include any), the board has the power to borrow money. Therefore, a board resolution is all that will be needed to enter the loan and grant the charge. No shareholder approval is needed. Therefore, (A), (B), (C), and (D) are incorrect.

Answer 60

(D) The collector has no claim because no damage was caused to his goods. Since the damage was caused accidentally, any claim would need to be in the tort of negligence. For an action in negligence the collector would need to show that the movers owed him a duty of care, that they were in breach of duty, and that the breach caused damage. Negligence is not actionable without proof of damage and, since his goods were not damaged, he has no claim. (A) is not correct. While the collector had no contract with the movers, they could still owe him a duty of care in the tort of negligence. (B) is not correct. The tort of trespass requires an unlawful interference with the collector's possession of the goods. The movers had permission from the collector to move the goods so there was no unlawful interference. (C) is not correct for two reasons. First, the principle of res ipsa loquitur is unlikely to apply here, because there is an explanation for how the accident happened. Second, the principle of res ipsa loquitur is used to assist in proving breach of duty, whereas here the claim will fail because the collector cannot establish causation of damage. (E) is not correct. It is true that the collector has no claim in either trespass or negligence, but this is not because the movers did not intend to damage the goods. An intention to cause damage would not be a required element in either trespass or negligence.

Answer 61

(B) Any contract that contemplates a criminal act will be illegal and automatically void. As murder is a criminal offence, this would apply in this scenario. (A) is incorrect as, if this had been a legal contract, both parties would have provided consideration. (C) is incorrect because this contract is illegal at its outset, not in its performance. (D) is incorrect because even though all the necessary elements for a valid contract may be present, the fact that the contract is for an illegal act renders it void, so no damages can be recovered for its breach. (E) is incorrect because the law of restitution does not apply when a contract is void for illegality from the start because it involves serious criminal misconduct. It is, however, correct that the law of restitution does not allow a wrongdoer to profit from their wrongdoing and might allow a party to recover amounts paid under a void contract where the reason for invalidity is not illegality

Answer 62

(D) To become part of UK law, Parliament needs to pass an Act of Parliament incorporating the treaty into UK law. Under the doctrine of parliamentary sovereignty, no form of law is higher than an Act of Parliament. This means that in order for an international treaty to become part of UK law, it needs to be incorporated through an Act of Parliament. (A) is incorrect because the requirement to lay the treaty before each House of Parliament for 21 days relates to ratifying the treaty. (B), (C), and (E) are incorrect because there is no need for the Supreme Court, the Monarch, or the Scottish Parliament to approve the treaty for it to become part of UK law.QUESTION ID: CNL004

Answer 63

(B) The importer will not be liable for breach because the offer had lapsed and so no contract was formed. Unless a time for acceptance is specified, an offer will lapse after a reasonable time. What is 'reasonable' will depend on the nature of the subject matter, for example, an offer to purchase perishable goods, will lapse more quickly. Here, the offer was for a consignment of fresh fruit. It is not reasonable to expect an offer for the sale of consignment of fresh fruit to remain open for three weeks--because the fruit would rot by then, as indicated by the fact that the importer feared its rotting after just three days. Therefore, the offer had lapsed before the greengrocer accepted it, so the importer is not liable for breach of contract. Thus, (A) incorrect. (C) is not correct, as there was no contact for the reasons stated above. Anticipatory breach occurs if before performance is due under a contract, one party indicates they will not perform. (D) is not correct. A contract can be rescinded or cancelled because of common mistake, which usually means that both parties to a contract were mistaken about the existence of the subject matter of the contract. Here, no contract was formed as discussed above. (E) is not correct. A contract will be discharged by frustration if it has become impossible to perform. Here, there was no contract to discharge. The importer's offer had lapsed before the greengrocer accepted it.QU

Answer 64

(E) The client will have to pay their solicitor £40,000. Damages based agreements are 'contingency' agreements in that they are contingent on the success of the claim and recovery of damages. If nothing is recovered, the solicitor is not entitled to legal costs. If the claim is successful, the solicitor's standard time costs can be recovered from the losing defendant. Here, the client has been awarded £400,000 in damages and the applicable percentage in the agreement is 10%, which means the solicitor is entitled to £40,000 from the client in total. Note that any amount the defendant has been ordered to pay in costs would be deducted from what the client owes when working out the total amount the client has to pay to the solicitor. (A) is incorrect because it has calculated the solicitor's fee using the hourly rate, but under the damages based agreement this rate will not be used. (B) is incorrect because it applies 10% to the solicitor's fee using the hourly rate instead of applying 10% to the damages recovered. (C) is incorrect because it applies 10% to the solicitor's fee using the hourly rate in addition to the damages recovered. (D) is incorrect because under the damages based agreement, the client must pay the solicitor 10% of the damages recovered

Answer 65

(D) A court is likely to find the variation binding because the airline had a right to terminate the contract and, therefore, there was consideration to support the variation (specifically, the airline gave up whatever right it had to terminate the contract based on the agency's poor record keeping). Therefore, (E) is incorrect. (A) is incorrect because a lawful act (such as terminating the contract) can amount to economic duress only in very exceptional cases such as blackmail. (B) is incorrect because the airline's expenditure was not incurred in return for the agreement to vary the commission; it was incurred to resolve the problem with the agency's record-keeping, so it is past consideration. (C) is incorrect because undue influence involves improper threats (or the abuse of a relationship of trust and confidence, which is not relevant here). Here, the airline's threat to terminate the agreement was both lawful and justified, so it will not be regarded as improper.

Answer 66

(E) The royal prerogative is a collection of powers recognised by the common law as belonging to the Crown, which include the Monarch, government ministers, and government departments. This is in contrast to statutory powers, which are granted by Parliament to the government. Therefore, (A), (B), (C), and (D) are incorrect.

Answer 67

(E) The shareholders may reduce the amount of the dividend, through an ordinary resolution adopted for that purpose. The directors have the power to declare dividends out of lawfully available funds, but before the dividend may be paid, the shareholders must approve it (or approve a lesser amount) through passing an ordinary resolution. (A) and (B) are incorrect as the shareholders have no power to increase a dividend, even if there are additional funds lawfully available for that purpose. (C) and (D) are incorrect because the shareholders have the right to reduce the amount of a dividend by an ordinary resolution

Answer 68

(D) Damages for breach of contract may be recovered only for losses arising naturally from the breach and special or unusual loss which were in the contemplation of both the parties at the time the contract was made as a probable result of a breach of the contract. Normal trading profit clearly arises naturally from the supplier's breach of contract. The profit from a new line of business would have to have been in the reasonable contemplation of both the parties when they entered into the contract. There is nothing in the scenario to suggest this was the case. (A) is incorrect because, even if there is a breach of contract and the innocent party has suffered loss, that loss must not be too remote a consequence of the breach. In this scenario, the profit from the new line of business is likely to be too remote for the reasons set out above. (B) is incorrect because only the loss of profit from normal trading activity could be said to arise naturally from the breach, whereas the loss of profit from the new business is likely to be too remote as it was not in the reasonable contemplation of the parties at the time the contract was made. (C) is incorrect because it is unlikely that the loss of profit from the new contract was in the reasonable contemplation of the parties at the time the contract was made. This test is also not relevant for the loss of normal trading profit, which only requires it to have been a loss arising naturally from the breach. (E) is incorrect as the loss of the ordinary trading profit is likely to be held to be a loss arising naturally from the breach of contract by the supplier, and is therefore not too remote

Answer 69

C) Under the Sale of Goods Act 1979, when a seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract must be reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied. (There is also an implied term that the goods must be of satisfactory quality, that is, fit for the purpose for which such goods are generally used, but that is less likely to help the plumber in this case.) (A) is incorrect because, whilst the plumber's requirement might have been eventually incorporated into the contract as an express term, this is not clear in the scenario and is much less likely, particularly if they were dealing on standard terms and conditions. (C) is therefore the better answer as there is no doubt about terms implied by statute: they are incorporated automatically. (B) is incorrect for the same reason. (D) is incorrect as the scenario is clear that both parties are dealing in the course of business, so the correct statute is the Sale of Goods Act 1979. The Consumer Rights Act 2015 deals with contracts as between a business and a consumer. (E) is incorrect because the Supply of Goods and Services Act 1982 is relevant to the contracts for the hire of goods and goods supplied as part of a supply of services. Therefore, it is not relevant to the facts of this scenario

Answer 70

(D) Because there is a serious conflict of interests between the Secretary of State's private interests and their ministerial duties, the Secretary of State will likely need to resign from government. Ministers are required to avoid such conflicts of interest. Consequently, the Secretary of State would likely be expected to resign and (C) is incorrect. (A) is incorrect because it is not the best answer. On these facts, the Secretary of State is likely to be required to do more than merely give an explanation to the Prime Minister. (B) is incorrect because there is no evidence that the Secretary of State's department acted incorrectly or that the Secretary of State failed to account for the department's actions. ( (E) is incorrect because ministerial resignations usually relate only to their position within the government; their seat in the House of Commons (or the House of Lords) is unaffected.

Answer 71

(C) The case will be allocated to the multi-track. Claims in the County Court for more than £25,000 are allocated to the multi-track. (A) is incorrect because the small claims track is for cases involving less than £10,000 (or personal injury claims for less than £1,500). (B) is incorrect because the fast track is used for cases of more than £10,000 (or more than £1,500 for personal injury claims) and up to £25,000. (D) is incorrect, as the County Court Money Claims Centre handles debt claims and does not handle cases for damages such as the claim here. (E) is incorrect for a few reasons. First, the High Court usually does not hear cases involving less than £100,000 or where the claimant does not expect to recover at least £50,000 for a personal injury. Neither of those thresholds are met here - the claimant has chosen not to pursue damages for pain and suffering (and even if the patient pursued the claim, it was for less than £50,000). It should be noted that even if a malpractice claim for £50,000 were the threshold, the amount would not be met here because when determining the value of a claim, interest and costs are excluded. The claim here without interest and costs was £47,500

Answer 72

(E) The solicitor has not committed the offence of tipping off because she can rely on the defence of disclosure between institutions. The indirect offence of tipping off can arise where there is a disclosure to a third person that a suspicious activity report has been made to the police, HM Revenue and Customs, the National Crime Agency, or the firm's nominated officer if that disclosure might prejudice any investigation that might be carried out. However, a legal professional will not commit a tipping off offence if (1) the disclosure is made to another legal professional in the UK, a European Economic Area state, or a country or territory that imposes money laundering requirements equivalent to the European Union; (2) the disclosure relates to a client or former client of both parties, or a transaction involving them both; (3) the disclosure is made for the purpose of preventing a money laundering offence; and (4) both parties have equivalent professional duties of confidentiality and protection around personal data. Here, the solicitor disclosed her colleague's suspicious activity report to the other solicitor, which could constitute tipping off. However, the solicitor may rely on the defence of disclosure between institutions. The disclosure was made to another lawyer in the UK, the disclosure related to a transaction involving them both, the disclosure was made to prevent the other solicitor committing his own money laundering offence (that is, failure to report), and both parties are in the UK and have equivalent professional duties of confidentiality. (A) is incorrect because the relevant offence here is tipping off, not failure to report. In any event, the solicitor has no independent suspicions about her colleague's client's involvement in money laundering and therefore does not need to make her own report to the nominated officer. (B) is incorrect because, as explained above, the solicitor has not committed the offence because a defence is available. (C) is incorrect because the applicable defence here is disclosure between institutions rather than disclosure within an undertaking. The latter defence would be available if the other solicitor worked within the same organisation as the solicitor. (D) is incorrect because the disclosure in a tipping off offence may be in writing or oral.

Answer 73

(C) This is a case of negligent or innocent misrepresentation. In this situation, the innocent party can always rescind the contract, unless one of the bars to rescission applies or the court orders damages in lieu of rescission (which is unlikely here because of its significance to the buyers). The innocent party can claim damages unless the other party can prove that they had reasonable grounds for believing, and did believe, that the statement was true. That might be the case here if the sellers had no way of knowing of the planning application when they made the statement to the buyers. In that case the misrepresentation would be innocent rather than negligent. (A) is not correct, because it is not necessary to prove that the sellers knew of the planning application in order to claim damages. That would be tantamount to fraudulent misrepresentation, but that is not the only situation in which damages are available. (B) is not correct because rescission is available for both innocent and negligent misrepresentation. (D) is not correct because the innocent party does not have to prove negligence: it is for the other party to disprove it. (E) is incorrect because both rescission and damages may be available even though the representation was not fraudulent

Answer 74

(D) £104,000. Both the painter's trade profits and rental profits are assessable. Therefore, in total his income was £111,000. He may deduct his personal allowance from this figure. However, as his income is above £100,000, the personal allowance must be tapered so that he loses £1 of allowance for every £2 of income above £100,000. He has £11,000 of income over £100,000, so £5,500 must be deducted from his £12,500 allowance, leaving him with £7,000. Therefore, the painter's taxable income is £85,000 + £26,000 - £7,000 = £104,000.

Answer 75

(B) The solicitor's own personal interest and relationship with the husband create an own interest conflict in this matter (or a significant risk of one) and so this solicitor should decline to act. Of concern is that the solicitor could be tempted to act in her husband's favour in the negotiations. The solicitor also has a financial interest in the matter because she is married to the husband. (A) is incorrect because the solicitor must decline to act due to the own interest conflict. (C) is incorrect because the 'substantially common interest' exception is only relevant to conflicts between clients, and here the main concern is the solicitor's own interest conflict. (D) and (E) are incorrect because the solicitor cannot act even with consent

Answer 76

D) These are three of the points that the court will consider when determining the weight to apply. They will also consider whether the case involves 'multiple hearsay', whether the original statement was edited and whether there can be any suggestion that the events leading to the evidence being presented as hearsay evidence constitute an attempt to prevent proper evaluation as to its weight. (A) is incorrect because this is not a consideration for the court in determining the weight to attach. (B) is incorrect because the court will take no steps to adjourn the hearing of its own accord. (C) is incorrect because this is not a consideration for the court in determining the weight to attach. (E) is incorrect because this is not a consideration for the court in determining the weight to attach.

Answer 77

(B) The Model Articles give the board absolute discretion to refuse to register a transfer of shares. The board would be limited only by their duty to act in the best interest of the company. Therefore, (E) is incorrect. (A) is incorrect as no fee can be charged for registering a transfer of shares under the Model Articles. (C) is wrong as there is no special rule for transfers to existing shareholders. (D) is incorrect because a bona fide business reason for a refusal to register is not needed. As indicated above, the only limitation on the board's discretion is their duty to act in the best interest of the company. So, a personal reason for not registering the transfer (such as they don't want to give the transferee shareholder more voting power because they think he votes recklessly) could be valid

Answer 78

D) Under the general prohibition of FSMA, a solicitor may not carry on regulated activity in the UK unless they are authorised or exempt from authorisation. A regulated activity is defined as an activity specified in the Regulated Activities Order relating to an investment specified in the Order, which is carried out in the course of business, and to which no exclusions apply. The specified activities and investments might be remembered with the mnemonic device 'ADAMS F.M.DIPS'. Activities = Advising, Dealing as an agent, Arranging, Managing, and Safeguarding. The specified investments most relevant to a solicitor = Funeral plans, Mortgage contracts, Debentures, Insurance contracts, Pension schemes, and Shares in a company. The solicitor would be able to arrange for the sale of land for a client because while arranging is a specified activity, land is not a specified investment. (A) is incorrect because advising is a specified activity and a mortgage is a specified investment. (B) and (E) are incorrect because both clearly involve regulated activities (managing and safeguarding, respectively) and specified investments (debentures and pension schemes, respectively). (C) is incorrect because contracting on behalf of a client means the solicitor would be dealing as an agent, which is a regulated activity, and an insurance policy is a specified investment

Answer 79

(E) Every partner is an agent of the partnership and has apparent authority to bind the partnership on contracts as apparently carrying out business of the kind usually carried on by the partnership unless the creditor knows the party has no authority. Here, the partner told the supplier they did not usually order stock and so the supplier is on notice that this partner has no authority. Therefore, (B) is incorrect. (A) is incorrect as implied authority is a type of actual authority that arises from a previous course of dealings among the partners - a partner who lacks actual authority, but who nevertheless has been allowed by the firm to exercise the authority that is lacking, will be held to have such [implied] actual authority. Here, nothing in the facts indicates that the partners have condoned this partner's purchase of varnishes before and so there is nothing on which to base a claim of implied authority. (C) is incorrect as the scenario tells us that this partner does not order stock and so has no actual authority. (D) is incorrect because it is irrelevant - written proof is not required for apparent authority.

Answer 80

(C) The proposed acquisition will be defeated if all four directors attend and the chairman and one director vote against the acquisition. A board resolution is passed by simple majority vote, provided a quorum is present at the meeting. Under the Model Articles, a quorum is two directors. When there is a tie vote, the chairman has the casting vote-that is, the vote goes the way the chairman voted. If all four directors attended the meeting and two directors voted in favour of the acquisition and two voted against, there would be a tie. But in this scenario, the chairman voted against the acquisition, so it would be defeated. (A) is incorrect (that is, the proposed acquisition would not be defeated) because a majority (3:1) of the directors voted in favour of the acquisition-the chairman's casting vote only matters in the case of a tie. (B) is incorrect because the meeting had a quorum, and all the directors present approved the acquisition. (D) is incorrect because again, two directors constitute a quorum and the chairman's casting vote will come into play: there was a 1:1 tie and the chairman voted to approve the acquisition. Therefore, the acquisition was approved. (E) is basically the same situation-there was a tie and so the chairman's casting vote approving the transaction breaks the tie.

Answer 81

(C) Choice (C) contains all of the criteria the court will consider when assessing costs on the indemnity basis: reasonably incurred, reasonable in amount, and doubts resolved in favour of the party receiving the costs (which under our facts is the claimant). (A) is incorrect because it is not enough that the cost was reasonably incurred; it must also be reasonable in amount. Additionally, doubts are resolved in favour of the receiving party under the indemnity basis; doubts are resolved in favour of the paying party (here the defendant) under the standard basis. (B) is incorrect for similar reasons (only one of the two criteria and doubt resolution incorrect). (D) is incorrect as proportionality is relevant on the standard, not the indemnity, basis. (E) is incorrect as it is too vague to be the basis for allowing or disallowing individual items, although the principle of the interests of justice generally underpins the assessment of costs.

Answer 82

(C) is correct because this is the ratio decidendi and is binding. The remaining answers are persuasive because they have been mentioned in previous case law as an aside to the ratio and are not binding. Sometimes judges will provide hypothetical examples where the facts differ slightly from those before them in order to explain how they have reached their decision. They may also consider academic articles and the decisions of foreign courts that have explored similar areas of law for inspiration in helping them to reach a decision.

Answer 83

(C) A contract was formed because the friend's acceptance was effective on dispatch. Under the postal rule, acceptance by post creates a contract at the moment of posting, properly addressed and stamped, unless the offer stipulates that acceptance is not effective until received. Here, the friend dispatched first an acceptance and then a rejection of the photography buff's offer. The postal rule applies because the photography buff's offer did not specify that acceptance was not effective until receipt. Because the friend dispatched his acceptance before he called with his rejection, the postal rule applies. Thus, the friend's acceptance was effective, thereby creating a contract at the moment it was mailed, and his attempted rejection was ineffective. (A) is incorrect because the letter from the photography buff indicates that the subject matter of the contract was his camera that the friend had admired for some time. This description appears on its face to be sufficiently definite that a court would be able to determine with reasonable accuracy which camera is subject to the photography buff's offer to sell. (B) is incorrect because once the acceptance was effective, the fact that the photography buff received the rejection by telephone before he received the acceptance letter has no effect on the formation of the contract. (D) is incorrect because there is no requirement that a rejection of an offer to enter into such a contract must be in writing. (E) is incorrect as there is no suggestion that the initial letter was merely an invitation to treat. An invitation to treat is an expression of willingness to negotiate, whereas the letter from the photography buff was definite and clear enough to be an offer, and also does not fall into one of the categories of usual invitations to treat, for example, adverts, displays in shop windows or on shop shelves, and tenders.QUE

Answer 84

(C) The claimant must prove their claim on the balance of probabilities; that is, that their version of the facts is at least slightly more likely than not. (A) is incorrect because at least as likely as not would be 50-50. That's not quite enough in a civil case. As just indicated, the claimant must prove that their version of the facts is at least slightly more believable than the defendant's. (B) is incorrect because 'beyond a reasonable doubt' is the standard of proof required in the criminal court. (D) and (E) are incorrect because the defendant does not bear the burden of disproving the claimant's case. The fact that the court refused to grant an application for a motion to strike does nothing to change this. (E) is further incorrect because it states the wrong burden - 'beyond a reasonable doubt' is the criminal standard

Answer 85

(C) The expert's report must be disclosed to the defendant if the claimant intends to rely on it and it will lose its privilege. When a court authorizes the parties to hire their own experts, the expert's report does not have to be disclosed unless the party intends to rely on it. Such reports are privileged and are not subject to inspection by the party's opponent. However, if the party does intend to rely on the report, it must be disclosed and it loses its privilege and is subject to inspection. It follows that the other answer choices are incorrect.

Answer 86

(C) Seeking a Benjamin Order is the only way for the executor to gain full protection from a future claim by a known creditor. A Benjamin Order is a court order giving the personal representative (PR) leave to distribute the estate taking into account a possible claim from a person who cannot be found. (A) is incorrect. An indemnity provides some protection to the PR, but there is a risk that the beneficiaries might have insufficient funds to cover the indemnity payment. Consequently, this is not the best protection for the executor. (B) and (D) are incorrect. Placing advertisements will not protect against a claim from a known creditor. (E) is incorrect. Individuals have six months to make financial provision claims, but there is no such time limit for known creditors.Q

Answer 87

(B) The son should make a written variation passing the house to his daughter. A variation allows a beneficiary to change who receives their inheritance. To be effective for tax purposes, a variation must be made in writing, made within two years of death, and not made for monetary consideration. (A) is incorrect. When a beneficiary disclaims a gift, the gift falls into the residue. So here, a disclaimer would not pass the house to the son's daughter, and instead the house would pass to the woman's sister as part of the residuary estate. (C) is incorrect because the will would not become effective until the son's death, and he wants his daughter to receive the house now. (D) is incorrect. A lifetime gift would not be the best method because it would be a potentially exempt transfer, which would become taxable if the son were to die within seven years. (E) is incorrect. For the variation to be read back to the date of death as if the deceased had left the asset to the new beneficiary, the variation must be in writing. An oral variation is not effective.

Answer 88

(E) The man's partner must have lived with him for at least two years immediately before his death to be eligible to make a claim. Only certain types of applicant are eligible to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 ('the Act'). A person who was living with the decedent as a partner (such as the man's long-term partner) during the whole of the two-year period immediately before the decedent's death is eligible to bring a claim under the Act even if they were not married or civil partners. Therefore, (A) is incorrect. (B) is incorrect because a person treated as a child of the family of the deceased is eligible to claim. As the man's long-term partner's daughter had been living in the man's house for six years, she could make a claim despite the fact that the man was not her father. (C) and (D) are incorrect. The mother and sister were living independently of the man and so are not eligible to claim. Family members such as the mother and sister are only eligible to claim if the deceased had been making a substantial financial contribution towards their reasonable needs

Answer 89

A) The children's best course of action is to lodge a caveat with the Probate Registry to prevent the issue of a grant of representation. This is an appropriate course of action in cases such as this, where there are concerns over the validity of the will. Caveats are valid for up to six months, and if the matter cannot be resolved, it may end up with a judge determining the issue. (B) is incorrect. Although a judge may eventually need to determine the validity of the will, this would not prevent the woman's partner from obtaining a grant of probate in the meantime. (C) and (D) are incorrect. Citations do not prevent the issue of a grant. Instead, they are used to try to progress the issue of a grant. (E) is incorrect. There is no such limitation on when a grant can be issued

Answer 90

(D) The executor should pay the mortgage from the sale of the house and pay the other debts from the residuary estate. This situation involves the payment of debts of a solvent estate, as there are sufficient assets to meet all liabilities. A secured debt, such as the mortgage on the house, should be paid from the asset against which it is secured. This means that the house will be sold to pay off the mortgage. Unsecured debts should be paid from the residuary estate, rather than from specific legacies, such as the gifts of the watch and shares. Property specifically gifted in the will should not be used to pay debts unless other assets have been exhausted. Accordingly, (A), (B), (C), and (E) are incorrect.

Answer 91

(A) The bank accounts, car, antiques, and a £20,000 loan from the beneficiary will need to be used to pay the inheritance tax ('IHT'). The initial payment of IHT must be made before the PRs can apply for the grant. Consequently, the house and unlisted shares will be unavailable to fund the IHT, as these assets can be sold only with a grant as evidence of the executor's authority to sell these assets. However, the £200,000 in bank accounts can be paid directly to HMRC before the grant is obtained to fund the IHT. The car and antiques can also be sold to raise funds before the grant is obtained. This leaves an outstanding balance of £20,000, which can be funded via a loan from the beneficiary. (B), (C), (D), and (E) are therefore incorrect.

Answer 92

(B) The woman's husband has the best entitlement to act as administrator. The woman has made a valid will, but it fails to name an executor who can take on the administration of the estate. Therefore, the woman's estate will be administered by an administrator (rather than an executor) under a grant of letters of administration with will annexed. The order of entitlement to a grant of letters of administration with will annexed is set out in rule 20 of the Non-Contentious Probate Rules ('NCPR'). Under this rule, her husband, as the residuary beneficiary of the will, has the best entitlement of the surviving relatives to administer the estate. (A) is incorrect because the friend's wife has no entitlement to administer the estate. She is not a beneficiary or creditor and therefore has no entitlement to a grant. (C) and (D) are incorrect. The daughter is not a beneficiary or creditor of the woman's estate and therefore has no entitlement to a grant. (E) is incorrect. Under rule 20 NCPR, the woman's husband has a better entitlement to act as administrator as he is the residuary beneficiary of the will.

Answer 93

(B) The estate is an excepted estate and does not have to file an inheritance tax account. An estate which owes no inheritance tax ('IHT') and does not have to file a formal IHT account is called an excepted estate. To be excepted, the estate's total gross value plus specified transfers cannot exceed either (1) the inheritance tax threshold, currently £325,000, or (2) £3 million if the net chargeable estate does not exceed the threshold. The threshold can be increased to take account of the transferred nil rate band from a predeceased spouse if the entire nil rate band was unused. Here, the aggregate of the man's estate and his specified lifetime transfers (£50,000 to his son) is less than the nil rate band threshold of £650,000 which applies to the man's estate. This threshold is increased by 100% from £325,000 as the man's wife did not use any of her nil rate band on her death. (A) is, therefore, incorrect. (C) is incorrect. The gift of £50,000 to the son is considered a specified transfer that must be added to the value of the estate. An estate can be excepted if specified transfers do not exceed £250,000 in the seven years before the deceased's death. (D) is incorrect. No account is required as this is an excepted estate. (E) is incorrect. No IHT is payable on the estate. The fact that the man's wife left her entire estate to him allows his estate's IHT threshold to be increased to £650,000

Answer 94

(A) The man's wife has lost the right to renounce the executorship because she has intermeddled in the estate. A person named as an executor is free to renounce their right to act as an executor, provided they have not taken a grant of probate or intermeddled in the estate. Intermeddling is doing something which shows an intention to accept office. Here, the grant of probate has not yet been obtained, but the wife has intermeddled in the estate by contacting the banks and paying some of the man's bills. Therefore, she has lost the right to renounce the executorship. (B) is incorrect because a spouse named as an executor is able to renounce. (C) is incorrect both because there is no such time limit and because of the woman's intermeddling. A person is not able to partially renounce acting as executor. (D) and (E) are incorrect. For a renunciation to be valid, a formal renunciation of executorship must be prepared. This must be in writing, be signed by the executor, and must contain a statement that the person has not intermeddled. The document must also be signed by a disinterested witness and then filed at the Probate Registry. Verbally informing the sister of the renunciation or writing a simple letter to the Probate Registry is insufficient.

Answer 95

(D) £4,000. Only the gifts in excess of the £3,000 annual exclusion would be subject to tax. And any exclusion not used in the previous tax year can be carried forward one year as well. Here, the 2021 gift would not be subject to tax because it will be reduced to £0 by the annual exemption. As the gift did not exceed £3,000, there is no need to apply the annual exemption from the previous tax year and it will be lost. (Note that there is no option to use the previous years' exemption first.) The £4,000 gift will be reduced to £1,000 after the exemption is applied for the 2022/23 tax year. There was no exemption remaining to bring forward from the previous tax year, and so the £1,000 will be subject to tax. Similarly, the £6,000 gift will be reduced by the £3,000 by applying the 2023/24 annual exemption, and there is no other exemption to pull forward, so £3,000 of the £6,000 will be subject to IHT. £1,000 + £3,000 = £4,000

Answer 96

(E) When determining the amount of a chargeable lifetime transfer (such as gifts to most trusts) that is chargeable to tax, we need to take into account other CLTs made by the donor in the previous seven years, because IHT is a cumulative tax. The 2018, £214,000 gift was made within the seven years, so that is includible. However, from that amount, we subtract the £3,000 annual exemption for the 2017/18 year and a second annual exemption for the year preceding that (since we were told the man made only the two gifts, he did not use an annual exemption in the previous year, so we can carry that exemption forward to the March 2018 gift). That leaves a chargeable gift of £208,000 (£214,000 – (£3,000 + £3,000)) to carry forward. We can do the same for the May 2023 gift: £395,000 - £6,000 = £389,000. We add the two chargeable amounts together (£208,000 + £389,000) to arrive at a sum of £597,000. From that, we subtract the NRB to arrive at the amount chargeable to tax (£597,000 - £325,000 = £272,000). (Note: Technically, we would apply the NRB to earlier gift(s) first and subtract any remaining NRB from later gifts, but for problems you are likely to encounter on the SQE, the simpler method of adding the gifts together and then subtracting out the NRB should suffice.)QUESTION ID: TAX028

Answer 97

(D) £112,000. The gift will be included as part of the estate, as the gift was made within seven years of the time of death. However, the tax-free (nil rate) band is doubled since the gift came from both spouses. Thus, the taxable estate is £350,000, which is £1 million minus (2 x £325,000). This amount is taxed at 40% (£350,000 x 40% = £140,000). However, because the gift was made three years before the couple's death, the tax due will be tapered by 20% (in other words, only 80% of the £140,000 is due). £140,000 x 80% = £112,000

Answer 98

(D) The marriage exemption is £1,000 for anyone other than a parent, grandparent, or the other party to the marriage. There is no requirement for the person to attend the wedding, or even be invited to attend

Answer 99

(C) £1,800,000. To calculate the amount of the estate chargeable to tax, we reduce the amount of the estate by the nil rate band (£2,200,000 - £325,000 = £1,875,000). Because the man's estate included his main residence and he left it to his daughter – a lineal descendant – the amount may also be reduced by the residence nil rate band (RNRB). However, because the man's estate is over £2,000,000, we taper the RNRB by £1 for every £2 over £2,000,000. Here, the man's estate was over by £200,000. Therefore, we reduce the RNRB by £100,000, leaving only £75,000 of the £175,000 RNRB to be deducted. £1,875,000 - £75,000 = £1,800,000.

set 12&2&13&24&A1&S24 Flashcards

(124 cards)